Advanced Micro Devices Inc. is one of this year's best-performing chip stocks, but with skepticism about artificial-intelligence spending on the rise, it could use strong results and an aggressive outlook to maintain momentum when the firm reports earnings Tuesday afternoon. "What's needed for it to keep on humming is not just a beat, but a significant beat that comes with a pretty significant outlook," said Neville Javeri, portfolio manager at Allspring Global Investments, which owns the stock. "A modest report just won't cut it." While Wall Street expects a strong report from AMD, it lands at a time when investors have been quick to sell disappointment. Intel Corp. had its worst day in the stock market on Friday based on data going back to 1982, because of its weak outlook. AMD shares have sold off in sympathy with Intel, losing 10% on Friday to close October down more than 17%.
But they're still up about 118% for the year, far outpacing the 46% gain in the Philadelphia Stock Exchange Semiconductor Index, better known as the SOX. The rally has made AMD's stock look relatively expensive compared with shares of other chipmakers. It's trading at 32 times profits estimated over the next 12 months, which is the fourth-highest multiple in the SOX.
That's down from a high of 56 on June 30. However, AMD is traditionally a pricey stock, with an average multiple of around 34 since 2017. Wall Street analysts expect AMD to report a 92% jump in third-quarter earnings on a 41% rise in revenue, and both figures are projected to increase further in 2027.
The company is anticipating "very high" chip demand that exceeds supply over the coming few years, Chief Executive Officer Lisa Su said last month.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing